The Circle of Trump

Donald Trump is watching the financial markets very closely. For him, it seems to be an indicator of how far he can push his trade war agenda. When markets are doing well, he seems to feel free to take bigger risks and when markets fall, he seems to think he can always fix everything with a single tweet.

Investors are also watching Donald Trump very closely. They know that if they sell their stocks and markets go down, Trump will probably try to fix everything with a single tweet and send stocks back up. So they are wary of selling in the first place.

The Federal Reserve is watching Donald Trump and the markets very closely. Yesterday, the Fed indicated that if the geopolitical situation gets worse, they may need to step in to support the markets. However, the markets have been complacent lately. So, one could say that they’re not supporting markets here, they’re supporting Trump.

Donald Trump, seeing a supportive Fed and unwavering markets, feels free to take even greater risks by pushing his trade war agenda ever further.

Today’s Highlights

Please note: All data, figures & graphs are valid as of June 5th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

US Stock markets skyrocketed after Jerome Powell’s speech yesterday, seeing their biggest gains since January 4th.

To be clear, this is likely the quickest shift in global economic policy the world has ever seen. The Fed went from considering two or three rate hikes in 2019 in December to now laying the groundwork to cut interest rates within the next few months.

Now, the European Central Bank is deploying negative interest rates so it’s very unlikely that they’re going to be cutting. But what they could do and what some analysts expect…

I sure hope these guys know what they’re doing.

Crypto Whale Watching

It’s no secret that in the low liquidity environment of bitcoin and the crypto markets, whales have the potential to make waves.

So when the price of bitcoin fell 8.3% in under an hour on Monday night, many were out looking for a scapegoat. It seems that one turned up rather quickly and several clients have pointed me to this link showing a rather large transaction going from an unknown wallet to a well known Coinbase wallet.

The timing of this transaction does seem to line up with the price action. In this chart, you can see that the 25,160 BTC was moved onto the exchange about an hour before (purple circle) the dip in price.

So the theory goes that someone transferred about $250 million worth of bitcoin onto the exchange, sold the coins off, causing the price to crash, then bought them back at a lower price and moved them back into cold storage.

Would be a killer trade if they could pull it off.

Some quick calculations however, will show us that this is simply not possible. As highlighted in this piece, a $200 million order is a pretty tall order and it would be difficult to fill on any exchange. Coinbase Pro’s reported volume for the time of the selloff was just 2,000 BTC.

The Woes of Spring

No matter the conclusion, this is an excellent argument to be having at the moment and is a true sign that the crypto markets are now in Spring.

Spring is really the best time too. Winter was brutal this past cycle but I’m not so sure we should be looking forward to summer either.

A break above $9,000 at the moment would no doubt spark further attention and further price surges. However, those surges could very well be unrealistic and solely based on hype. Or in other words, what we want is sustainable value creation, not short-term momentum-driven surges.

Summer is hot and people get burned. Last crypto summer was arguably harsher than any winter. Bitcoin’s mempool got flooded, transaction times and fees went through the roof. Not to mention that many exchange sites crashed due to heavy traffic and several of them even had to close their doors to new customers.

It was a very tense time and even though bitcoin’s price doubled in 17 days, those gains were eventually given back and anyone who bought in during those two and a half weeks was left with a very bitter taste.

No, springtime is the best by far. So enjoy the peaks and valleys and take things as they come.

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